January just got a bit brighter and more interesting courtesy of some preliminary financial numbers released by optical components specialist Oclaro.
That's because the company, which makes and sells optical components and modules for the data center, metro and long-haul networking markets, is knocking it out of the park in the burgeoning 100G market, making it an even more attractive potential M&A target: Finisar Corp. (Nasdaq: FNSR) is regarded as the most likely suitor. (See Will Finisar Bid to Buy Oclaro?)
It's likely that Oclaro Inc. (Nasdaq: OCLR)'s price just went up, though. It's expecting to report fiscal second-quarter revenues, for the three months to December 31, of about $154 million, the top end of its previous guidance. The company notes that its sales of 100G products have been particularly strong. (See Oclaro Reports Fiscal Q2 Prelims.)
But as MKM Partners analyst Mike Genovese points out in a research note issued early Thursday, that would give it a year-on-year sales hike of 64%, compared with $94 million a year earlier. Its gross margin (GM) number is also ahead of expectations, at about 40% compared with the 33-36% guidance. Lapsing into teen-speak, Genovese notes that these are "super strong GMs … we would have preferred to see GMs step up to 40% in a more gradual manner over several quarters, but we are very impressed with the company's execution nevertheless."
Not surprisingly, the news gave Oclaro's share price a lift, with the stock gaining about 8% to $8.75 in post-market trading late Wednesday. That sort of price would give Oclaro a market value of about $1.46 billion.
Full fiscal second-quarter financial details will be revealed on January 31. And while the current (fiscal third) quarter might not display the same kind of stellar numbers, due to expected seasonal demand fluctuations most notably in the important Chinese market, the prospects look good for Oclaro, according to Genovese.
"We view the company as having the best management team and execution capabilities in the Optical components industry … We think the company still has several more quarters of Chinese long haul demand ahead, which should take it right into the start of the Metro cycle in China and a further significant order up-tick," says the analyst, who also believes Oclaro is "a potential take-out candidate."
— Ray Le Maistre, , Editor-in-Chief, Light Reading